George Osborne facing vote to delay fuel duty rise

George Osborne will be challenged to fund a delay in next year’s planned rise
in fuel duty by closing loopholes in the tax system.

By James Kirkup, Deputy Political Editor

9:55PM GMT 08 Nov 2012

The Labour Party will urge the Chancellor not to proceed with a scheduled 3p rise in fuel prices in January.

MPs will vote on the Labour proposal next week, giving Conservative MPs the opportunity to join the opposition to the tax rise.

Mr Osborne is under increasing pressure to scrap or postpone the increase in his Autumn Statement next month, amid rising pump prices and growing public anger over tax. Figures from the House of Commons Library this week showed that for a typical litre of petrol costing 138.3p, a total of 81p — almost 60 per cent — now goes to the Treasury in fuel duty and VAT.

Ed Balls, the Labour shadow chancellor, said the scheduled rise should be called off because it would put an unfair burden on household finances and small businesses.

“At a time when the cost of living is rising, our recovery is fragile and this out-of-touch government is giving 8,000 millionaires a tax cut, it cannot be right to hit middle- and low-income families and small businesses with another tax increase,” he said.

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Mr Osborne has postponed or scrapped several previous rises in fuel duty, and minsters say they are determined to ease the pressure on household budgets.

Mr Balls estimated that postponing January’s rise until April would cost the Treasury £350 million.

He suggested that Mr Osborne could raise the money by closing a tax loophole highlighted by The Daily Telegraph earlier this year.

Under an alleged tax avoidance scheme, big employment agencies are said to be reducing their tax bills by millions of pounds a year. Recruiters identify a certain amount of a worker’s weekly pay as expenses, and then claim tax relief on those expenses from HMRC.

Such claims were supposed to be banned last year, but tax experts say that the rules are so complicated that some firms have been able to continue using them. Mr Balls said that by tightening the rules, Mr Osborne could raise hundreds of millions of pounds, more than enough to offset any losses incurred by delaying the fuel duty rise.

Labour will put its proposal to a vote in the Commons on Monday.

“I hope MPs from all parties will stand up for their constituents and back our call,” Mr Balls said.

The National Institute of Economic and Social Research last week estimated that the rise in duty would cost the economy £1 billion in stalled growth — more than the £800 million it would generate in revenue.